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Supreme Court Upholds Sanctity of Public-Private Partnership Tenders, Quashes Arbitrary Cancellation

Background

The case involved a tender issued by the Kolkata Metropolitan Development Authority (KMDA) for the maintenance of two underpasses on a public-private partnership basis. The appellant, V.S. Advertising, was awarded the tender after submitting the highest bid. However, the KMDA later canceled the tender, citing technical faults and a change in policy.

Arguments

The appellant argued that the cancellation of the tender was arbitrary and influenced by extraneous considerations, particularly the instructions of the concerned minister. The respondent, KMDA, claimed that the tender was canceled due to technical faults and a change in policy, whereby the maintenance of the underpasses was handed over to the Kolkata Municipal Corporation (KMC).

Court's Analysis and Reasoning

The Supreme Court closely examined the internal file notings of the KMDA and found that the decision to cancel the tender was not based on any genuine technical faults or the change in policy, but rather at the behest of the concerned minister. The court held that the State's actions in contractual matters must conform to the principles of fairness, reasonableness, and non-arbitrariness enshrined in Article 14 of the Constitution.

The court emphasized the importance of maintaining the sanctity of public tenders, which are designed to ensure transparency, competition, and the best value for public funds. It noted that once a contract is awarded through a valid tendering process, its termination must adhere strictly to the terms of the contract, and the executive powers can be exercised only in exceptional cases by the public authorities.

Decision

The Supreme Court quashed the notice of cancellation dated February 7, 2023, and set aside the High Court's judgment that had upheld the KMDA's decision. The court held that the cancellation of the tender was arbitrary and influenced by extraneous considerations, thereby violating the appellant's rights under Article 14 of the Constitution.

The court's decision underscores the importance of maintaining the sanctity of public-private partnership tenders and the need for public authorities to exercise their powers in a fair, reasonable, and transparent manner, even in contractual matters. This judgment serves as a strong reminder to the State and its instrumentalities that they cannot arbitrarily terminate contracts or tenders, and must adhere to the principles of good governance and the rule of law.